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280 | Premium Letdown: Hotels challenge property insurers’ refusal to cover COVID-19 revenue loss

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As the hospitality industry struggles to mitigate the massive loss of revenue caused by the coronavirus pandemic, hundreds of hotel owners are filing lawsuits to force their property insurance providers to cover their financial casualties.

Meantime, state and federal lawmakers are considering legislation that would mandate U.S. insurance companies pay for business losses related to COVID-19.

Such a payout could surpass $600 billion, reported Best’s Insurance in May.

American Property Casualty Insurance Association, a trade group, puts the payouts even higher. In June, the association reportedly estimated payouts to would cost insurers $255 billion to $431 billion a month.

The amounts are not sustainable and would ultimately make many insurers insolvent, say insurance industry experts.

Hotel owners say they deserve payouts because they’ve paid premiums for years to cover high-loss scenarios such as the one they’re facing now.

In almost every case, insurers are refusing to pay, saying policies exclude losses caused by a viral plague or COVID-19 has not caused any physical damage to hotel properties that result in a stoppage of business.

It’s fixing to be an epic battle.

In this episode of Lodging Leaders, we examine the issue of business interruption insurance for hotels negatively impacted by the coronavirus pandemic.

We feature Sanjay Patel, CEO of MHG Hotels in Indianapolis who has filed a lawsuit against his insurance provider; Robert Zarco, a partner at the law firm Zarco Einhorn Salkowski & Brito in Miami who specializes in litigating business interruption insurance claims on behalf of business owners; Gregory Riehle, a lawyer and hospitality consultant and former CEO of the Resort Hotel Association, a hotel insurance group; and Robert Hartwig, Ph.D., a clinical associate professor and director of finance at the Center for Risk and Uncertainty Management at the University of South Carolina’s Darla Moore School of Business who’s co-authored a white paper about the un-insurability of businesses affected by viral pandemics.

Resources and Links

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  • 329 | Ruff and Ready: ADA gives hotels a short leash when accommodating guests with service animals

    Many hotels these days have made room for guests with disabilities. Hotel managers and staff should also know what the Americans with Disabilities Act says about accommodating guests with pets. During the pandemic lockdowns, a lot of people added a pet to their household and now they’re bringing Fido along on vacation. Hotel employees need to know how to cater to both consumers who are pet owners as well as guests who travel with a trained service animal. Episode 329 of Lodging Leaders podcast reports on how the ADA defines a service animal and how a hotel is legally obligated to serve a guest who comes with a dog or any other animal.

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    Nearly 48 million Americans plan to travel over the Fourth of July weekend, predicts AAA. Most of them will drive and many of them plan to stay in hotels. What makes a travel consumer choose your hotel? Price can be a factor but so can the story the property tells through its online photos and its real-life curb appeal. First impressions of a hotel set the tone for the guest’s entire stay. Its roadside image is more important than ever as the lodging industry this summer hangs its hopes on a comeback driven by domestic travelers. Lodging Leaders podcast explores the importance of a hotel’s curb appeal as hoteliers think of ways to attract travelers seeking safety and assurance as the nation emerges from the coronavirus pandemic.

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